Manulife Financial (MFC.TO)

All lifecos will benefit in a rising interest rate environment. Recent earnings reported were not that fantastic and thinks this has to do with the historic volatility of their earnings. Doesn’t think the market is giving the lifecos the benefit of the doubt, but there is no question that this is a good way to play a rising rate environment.

Stock vs. Stock. MFC-T vs. SLF-T. MFC-T has 10% earnings growth for the next couple of years and SLF-T is a little less than that. Times like this are a buying opportunity.

Metrlife (MET-N) or Manulife (MFC-T). Which has a better upside? All things being equal, and if she liked both of them equally, she would prefer the Canadian stock because of the currency. They have good business in Asia which, longer-term, is going to be a good growth area. Lower interest rates are going to be a headwind, but that is a non-core issue. Valuation is not onerous and it provides an attractive yield.

It is going to be hard for all of the insurance companies to break out of this rut in the current conditions. (See comments under Prudential (PRU-N).)

If interest rates rise, this will work. If they don’t, it will stay in the same range. Excellent company. The company has been de-risked to such an extent that the increase in equities hasn’t really driven the company to a higher level. Because of this, he prefers Sun Life (SLF-T). If you have a longer-term outlook, this is fine.

Given where interest rates are, it is getting more and more difficult for these insurance companies to deliver on products that promise to payout a high rate for decades.

The stock had a really good run over the last couple of years. They are very levered to higher interest rates. The story got a little ahead of itself. A better growth profile than the banks. He has no trouble holding it.

Expects that in the next 12-24 months we are going to have higher yields, which will be a tailwind for this company. 45% of earnings is coming from the US. Trading below its five-year average. Solid top and bottom-line trends in Asia. Yield of 3.05%.

He has an issue with the low interest rate environment and insurance companies. But they have brought their leverage down and that has helped them. They would like to do acquisitions, but the big ones are few and far between. They can grow their ROE, but you need to still see less leverage on their balance sheet. He prefers SLF-T where they have the asset management business.

Manulife (MFC-T) or Sun Life (SLF-T)? Both of these companies pay decent dividends in the 3%-4% range, but the business doesn’t seem to grow very much. They don’t do very well in a low interest rate environment. He would rather do something else with his money. Not his kind of investment.

This is under a lot of pressure. The interest rate scenario is obviously not positive for insurance companies. The CEO wants to get the company up to $4 billion in core revenue, and right now they are at about $3 billion. They are going to need a lot of things to go right in order to get the last billion dollars squeezed out. He is right on the edge about being nervous in owning this name. 50% of their revenues are coming in from abroad including the US and Asia. They need a better market and they need rates to go up for them to do much better from here.

October to December and February to May are periods of seasonal strength. It tends to go lower in January. Hang in there. Buy on weakness until part way into February. The trend is mixed, near its 20 day moving average and it is outperforming the financial services sector and probably the Canadian market as well. It is getting lined up.

He likes SLF-T better. The decline in interest rates really isn’t a problem. It is good for the Canadian economy, however.

Both this and Sun Life (SLF-T) are quite interchangeable. With Sun Life you are getting a little bit higher dividend. Longer-term both insurers will do quite well as will Great West Life (GWO-T). They tend to do well with rising interest rates and rising equity markets.

This will be negatively impacted on the spreads by the lower interest rates, but probably offsetting it is 275 points upwards on markets, and maybe markets continuing net higher over the year. He likes this company. Has really good Asian growth. Has pulled back lately with the softness in Canadian financials. Has a $25 target.